Is Loyalty Lost In A World of Points And Leaderboards? [Future Of Retail]

The introduction of game-based reward systems has created new ways to capture consumers’ attention by incentivizing them for their repeated engagement, but do all those points help keep fans by your side?

In commodity-driven marketplaces of the past where ‘stuff’ was the goal, these points carried value, allowing people to accrue vast stores that could be redeemed for discounts or better yet, more stuff. But as we transition into a place where experiences matter more, loyalty programs need to leapfrog ahead, creating new benefits and social value that excite their customers and give them a reason to keep coming back.

Social CRM systems are helping retailers and brands develop more meaningful relationships with their shoppers by linking individual engagement with a wider community. By encouraging and rewarding participation, these platforms can connect customers in new ways, creating more opportunities for them to share common experiences, interests and affinity, which provide value that grows over time. Tying rewards to participation in a wider community to provide lasting benefits to both brands, retailers and their customers is a trend from PSFK Labs‘ Future of Retail report that we’re calling Community Loyalty.

Although points capture consumer’s attention, loyalty programs are producing less memorable interactions for brands. During the height of active loyalty membership programs, Colloquy’s 2011 loyalty program census found that the average US household has enrolled in more than 18 loyalty programs and they are active in less than half of those programs. There are roughly $48 billion in reward points and miles issued annually, with at least one-third ($16 billion) going unredeemed by consumers. Active membership has slipped and overall growth has changed direction in Colloquy’s 2013 report. Furthermore, the impact of loyalty programs has become less memorable as an ACI global study found that three out of four Americans that are members of at least one retail loyalty card program, 85% of members report that they haven’t heard a single word from a loyalty program since the day they signed up.

Companies need to look at the tools available to help them listen to what customers want and invent new ways of delivering stimulating experiences. eMarketer.com noted that “Points, coupons and freebies are great for grabbing initial attention, but in the long run these promotions can’t make up for a lackluster customer experience.” Companies are looking for interactions tied to consumer interests that they can partake in to make the brand relationship more intimate. Patagonia’s Vice President of Retail, Robert Cohen, describes how they look at collaborating with their consumers, “obviously that rich customer relationship that you really want is ‘We’re like you. We care about the same things you do. Let’s do things together.’ In a lot of ways the desire to build that relationship is about retailers trying to make big business feel a lot smaller.”

For companies that are looking to craft emotional perks for long term loyalty PSFK Labs‘ Director, Scott Lachut, notes that “Status and recognition are worth more than points and discounts. Reward your community of shoppers for sharing and participating in the activities that are meaningful to them and make sense within the broader context of your store or brand. Where possible leverage existing networks rather than starting from scratch.”

With that in mind, companies that are looking to re-frame what loyalty means to their customers should consider the questions below:

Should you create your own community or leverage existing networks?

Are there unique opportunities to incorporate or reward existing customer behaviors?

What is the long term value for your customers and your brand?

What ways can your most engaged fans be tapped to support your larger community of customers?

How can you leverage customer assets as part of your marketing efforts?

What information or interactions can you elevate to help your customers get recognition from their peers?

How can you activate your community to take part in socially-responsible initiatives?

How can you encourage engagement on existing social platforms?

In the fourth edition of the Future of Retail Report, PSFK Labs brings together two interconnected themes and eleven key trends that provide a foundation for the modern shopping experience. The findings are brought to life with best-in-class examples, actionable strategies and leading questions to inspire leading retailers and brands. Join us at our San Francisco conference on Nov. 21st where talks from retail innovators will bring the key themes to life.